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Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures

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Author Info
Colavecchio, Roberta
Funke, Michael

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Abstract

This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.

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Publisher Info
Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 19 (2008)
Issue (Month): 4 (December)
Pages: 635-648
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Handle: RePEc:eee:chieco:v:19:y:2008:i:4:p:635-648

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Related research
Keywords: C22 F31 F36 China Renminbi Asia Forward exchange rates Non-deliverable forward market Multivariate GARCH models;

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